A group of Lower Manhattan artists, squatting illegally in a city-owned building, were kicked out yesterday by cops who clamped a padlock on the front door.

"We may cut the lock and go back in," said Christie Rupp, one of 50 artists who had set up an art gallery as a protest inside the corner storefront at 125 Delancey St.

Alan Moore, a spokesman for the group, said he has been trying for a year to persuade the city's Housing Preservation and Development agency to rent him the large space in the shadow of the Williamsburg Bridge -- at $650 per month rent.

"They were very adamant with us," he said. "We kept trying to deal with a Mr. Furman at HPD. He put us off. He stonewalled us.

"So finally, we took the place over ourselves," he said. "But the city would rather see the place empty and decaying."

A spokeswoman for the housing agency denied they were ever approached for space by the artists and said they would discuss alternate locations with them.

"There's absolutely no way the artists can stay there," she said.

"We're not so sure we want to accept their compromises so easily," Miss Rupp said.

"We want to remain on Delancey St. We don't believe the show should be moved."

She said the vacant building, like other city-owned properties on the Lower East Side, could be put to good use to serve the community.

But instead, the city has turned its back on the area and is forcing hundreds of residents and businesses out of the once-thriving commuinity, she said.

"There's a neighborhood group who would like to see a day-care center here, bu the city won't listen to them," she said. "Another group would also like to begin a music school."

Merchants in the area say the city is dragging its feet on a 10-year-old revitalization program and is deliberately refusing to provide the neighborhood with basic improvements and services.

"Big business uptown and the city are in a conspiracy to kill us businessmen on Delancey St.," said Gershon Mamlak, an interior decorator on the street.